Student-run investment fund outperforms S&P 500
The Madison Investment Fund (MIF) works out of a 10 x 12 foot office in Zane Showker Hall on the campus of James Madison University in Harrisonburg, Virginia. Unlike most business schools in the country, they don't have a Bloomberg terminal, a computer system that can monitor and analyze financial data in real-time.
Last year the Madison Investment Fund outperformed the S&P 500. The S&P is an index of 500 of the largest companies today and is often used as a baseline for comparison.
"That kind of speaks to the work that we do without it," said Matt Reustle, junior, associate manager of the non-cyclical sector.
In 2007 the S&P 500 saw a total return of 5.49 percent of their investment; the MIF returned 5.7 percent.
The Madison Investment Fund is a student organization offering members the opportunity to take financial theory and apply it to real investment situations. In 1999 MIF was given $100,000 of the University Foundation's endowment to invest.
"We do this because we love it," said Eric Lane, junior, associate manager of the finance sector. Last week the fund's assets totaled $136,215.28.
MIF is divided into six sectors: cyclical, non-cyclical, technology, finance, energy, and portfolio management. Each sector is run by a manager and contains analysts. The approximately 35 members meet within their sectors to research potential investments they then propose to the fund. Representatives from the sector present the potential investment, and members vote on whether or not to invest.
"We consider ourselves to have a fiduciary duty to preserve the endowment," Lane said. "So we take it really seriously in picking stocks that are conservative."
This week Lane presented ICICI, an Indian bank, to the fund.
MIF tends to emphasize value funds, which are every day things such as cigarettes or toothpaste, versus riskier growth funds.
"We're not trying to hit a home run," Restle said.
While the focus is on value, MIF doesn't ignore growth funds.
"Essentially, we look to buy good companies on sale," senior Justin Luse, president and manager of the energy sector said.
Around the middle of November, MIF reached an all time high of $151,000.
While MIF devotes about half of its meeting to investments, the other half is focused on education.
"We do a lot more with career advice now," Reustle said. "We're trying to help some of the younger kids figure out what they want to do."
MIF meetings usually present potential career descriptions as well as new investments members are considering.
Members meet in their sectors multiple times a week on top of their full-group meeting. Luse said MIF requires a significant time commitment and estimates analysts commit at least 10 hours a week to MIF.
"I've been known to neglect a class or three," Lane said.
MIF members start each day with a morning brief in their inbox summarizing what's been happening in the market. The stock market doesn't close for summer vacation, and neither does MIF. The fund continues investing through conference calls and e-mails.
"Money never sleeps," Luse said.
The time is worth it, according to Reustle, who says he now has had valuable accounting and finance experience before ever enrolling in a class.
Sophomore Alyna Galli, portfolio management analyst, said MIF helps her see how finance works.
"It makes it make more sense when you're in a finance class," she said.
MIF is open to all majors, and though it's predominantly filled with business majors, Luse said there's a psychology major in the fund right now. Two of the newest members, sophomores Conor Gordon and Galli, both said the application process was stressful and intimidating.
"We keep it a rigorous process because of the intensity of the work that we do," Lane said. "The process to get in is not a cake walk by design."
Reustle said the interview process is similar to ones students will find in the real world.
This spring MIF will compete in the annual RISE Competition in Dayton, Ohio. More than 250 business schools come together for a convention and present their portfolios. MIF won under equity value category in 2004.
Reprinted with permission from "The Breeze," the student-run newspaper at James Madison University in Harrisonburg, Virginia